If you itemize tax deductions on Schedule A, you may be able to write off sales tax and property tax you've paid during the year. It's the only place you can claim a deduction for any taxes, unless you claim them as a business expense. The IRS rules spell out which tax payments are deductible.
You can write off state, local and foreign property taxes on your home or vacation home -- provided the tax is applied uniformly in your community and is based on property values. Counties and cities often pay for particular projects, such as new sidewalks or sewers, by levying a special tax assessment based on how much owners benefit from the project. You cannot deduct these special assessments. If you pay property taxes into an escrow account, you deduct what the government actually collected this year, rather than the amount you deposited in the account.
You can take an itemized deduction for taxes on personal property, such as your boat or car. This only applies if the tax is based on the value of the property: If the tax on your car is based on weight, or a uniform, one-size-fits-all registration fee, you can't write it off. It must be an annual tax: Even if you pay in multiple installments each year, or every other year, the local government has to charge the tax annually.
In 2004 Congress established the sales tax deduction as an alternative to deducting state income tax. Under this provision, taxpayers can write off the income tax charged by their state and local governments, or the sales tax, but not both. This gives residents in states with no income tax an alternative deduction they can claim. The deduction isn't a permanent feature of the tax code, however -- instead, Congress renews it for one or two years at a time. If Congress stops renewing the deduction, you can no longer claim the write-off. As of September 2011, Congress had not renewed the sales tax deduction for 2012 and beyond.
If you're self-employed, you can write off any business-related sales or property tax you pay on Schedule C. As you don't have to itemize, you can write off the taxes even if you take the standard deduction. In addition to deducting personal property tax you pay on business vehicles, you also write off your license, tags and other fees. If you use property partly for business, partly for pleasure you divide the costs up. For example, if you use 8 percent of your house as a home office, you can deduct 8 percent of your property tax bill on Schedule C.
- Jupiterimages/Creatas/Getty Images
- Can I Claim Property Tax on My Federal Return?
- Is Sales Tax Deductible as an Itemized Deduction?
- Can I Deduct Stuff I Bought for My House?
- Can Taxes You Pay on Your House Be Deducted on Your Federal Return?
- Does Buying a Travel Trailer for Living Purposes Count as Tax Deductible?
- Tax Help for Home Owners
- Tax Breaks on Houses and Rental Homes You Own
- How Much Money Will I Save in Taxes If I Buy a House?